Indicates year in which payback is accomplished1. Can you rank the projects simply by inspecting the cash flows? 2. What criteria might you use to rank the projects? Which quantitative ranking methods are better? Why? 3. What is the ranking you found by using quantitative methods? Does this ranking differ from the ranking obtained by simple inspection of the cash flows? 4. What kinds of real investment projects have cash flows similar to those in Exhibit 1?

1.Although we can rank the projects by simply inspecting the cash flows, it is still not a good measure to rank them. The Ranking by simply inspecting the cash flows:
Rank1st2nd3rd4th5th6th7th8th
Project35841762
Cash Flows10,0004,2004,1503,5613,3102,5602,2002,165

2.It would be better and more accurate if we used quantitative methods like Net Present Value, Payback Period, Discounted Payback Period, Internal Rate of Return, Average Accounting Return, or Profitability Index. a.Net Present Value:

...Case 17 – The InvestmentDetective
The case of the InvestmentDetective laid out the cash flows for us in each of eight different projects. Before doing any calculations we came up with the assumption that we could not rank the projects simply by inspecting the cash flows.
Without the ability to rank the projects based off of cash flows solely, we had to use some analytical criteria as a capital budgeting analyst to provide some thorough support and reasoning for how we ranked the four best projects. In this case we are only using quantitative considerations that we deem to be relevant and no other project characteristics are deciding factors in our selection of the best four projects. When coming up with our calculations to rank the four best projects we have to take into account that each project is going to require an initial investment of two million dollars and in using historical data from other capital budgeting analysts in the firm, we deemed a ten percent discount rate as an appropriate figure for our calculations.
The analytical criteria in which we feel we gives us the best results to help us choose the top four projects are Net Present Value, Internal Rate of Return, and the Payback Period calculation. We are basing our rankings solely on the results we receive from our Net Present Value calculations because we feel this method to be the most consistent and it also takes into...

...For the exclusive use of S. YAN
￼UV0072 Version 2.2
￼THE INVESTMENTDETECTIVE
The essence of capital budgeting and resource allocation is a search for good investments in which to place the firm’s capital. The process can be simple when viewed in purely mechanical terms, but a number of subtle issues can obscure the best investment choices. The capital-budgeting analyst, therefore, is necessarily a detective who must winnow bad evidence from good. Much of the challenge is in knowing what quantitative analysis to generate in the first place.
Suppose you are a new capital-budgeting analyst for a company considering investments in the eight projects listed in Exhibit 1. The chief financial officer of your company has asked you to rank the projects and recommend the “four best” that the company should accept.
In this assignment, only the quantitative considerations are relevant. No other project characteristics are deciding factors in the selection, except that management has determined that projects 7 and 8 are mutually exclusive.
All the projects require the same initial investment, $2 million. Moreover, all are believed to be of the same risk class. The firm’s weighted average cost of capital has never been estimated. In the past, analysts have simply assumed that 10% was an appropriate discount rate (although certain officers of the company have recently asserted that...

...﻿The InvestmentDetective Case
We can use normal investment to calculate the data, but we also can do it as reinvestment to invest every project for the same years. For every question, I will give answers for both normal investment and reinvestment.
1. We can rank the projects simply by the cash flow data.
Normal investment:
Rank
1
2
3
4
5
6
7
8
Project number
3
8
6
1
5
7
4
2
Cash flow
8000
2150
200
1310
2200
560
1561
165
Reinvestment:
Rank
1
2
3
4
5
6
7
8
Project number
3
8
6
1
5
7
4
2
Cash flow
8000
4300
3000
2620
2200
1680
1561
825
However, the rank simply inspected by the cash flows is not the best method to evaluate the projects. Because this method does not consider time period, WACC, Net present value and other factors. All the factors could affect the value of project.
2. To evaluate the investment projects, we can use 5 main methods, NPV, IRR, MIRR, payback and discount payback. Each method has different advantage to evaluate the investment projects. It is better to use NPV and MIRR methods to evaluate the projects. NPV can provide basic accurate methods to use time value of money to estimate investments. MIRR includes both WACC and reinvestment rate; therefore, it is more accurate to evaluate the investments.
3. First, NPV is the most common and useful method. It provides a...

...simply inspecting the cash flows. However, it is not a good method to rank the projects. In order to ensure that the investment projects selected have the best chance of increasing the value of the firm, we need tools to evaluate the merits of individual projects and to rank competing investments. In this case, our group using some tools which are Payback Period, Net Present Value (NPV) , Profitability Index (PI), and Internal Rate of Return (IRR). We are only using quantitative considerations that we think to be relevant and no other project characteristics are deciding factors in our selection of the best four projects.
Payback Period
NPV
PI
IRR
Sum of Cash Flow Benefits
Excess of cash flow over initial investment
Project 1
6 years 22 days
$ 73.09
104%
10.87%
3310
1310
Project 2
2 years
($ 85.45)
96%
6.31%
2165
165
Project 3
15 years
$ 393.92
120%
400%
10000
8000
Project 4
6 years 18 days
$ 228.82
111%
12.33%
3561
1561
Project 5
7 years 1 month 20 days
$ 129.70
106%
11.12 %
4200
2200
Project 6
1 year
0
100%
10%
2200
200
Project 7
1 year 10 months 20 days
$ 165.04
108%
15.26%
2560
560
Project 8
6 years 14 days
$ 182.98
109%
11.41%
4150
2150
When coming up with our calculations to rank the four best projects we have to take into account that each project is going to require an initial investment of two million dollars and in using historical data...

...1. THE INVESTMENTDETECTIVE
This case presents the cash flows of eight unidentified investments, all of equal initial investment size. The student’s task is to rank the projects. The first objective of the case is to examine critically the principal capital-budgeting criteria. A second objective is to consider the problem that arises when net present value (NPV) and internal rate of return (IRR) disagree as to the ranking of two mutually exclusive projects. Finally, the case is a vehicle for introducing the problem created by attempting to rank projects of unequal life and the solution to that difficulty criterion.
Please answer following questions
1. What analytical criteria can we use to rank the projects? How do you define each criterion? Please evaluate each project using all investment criteria we learned during the class.
2. Which of the two projects, 7 or 8, is more attractive? How sensitive is our ranking to the use of high discount rates? Why do NPV and IRR disagree?
3. What rank should we assign to each project? Why do payback and NPV not agree completely? Which criterion is best?
4. Are those projects comparable on the basis of NPV? Because the projects have different lives, are we really measuring the “net present” value of the short-lived projects?
(Question 4 Hint)
Comparisons based on standard NPV ignore the inequality of project lives such as those in the case. Simply put,...

...﻿
Detective
Leah Hesman
Mr. Hurley
January 20, 2014
CHV20H
Table of Contents
JOB DESCRIPTION……………………………………………….............................................. 1
SKILLS AND KNOWLEDGE REQUIRED...........................................................................…1-2
EDUCATION AND TRAINING REQUIRED……….………………………………….......…2-3
CURRENT NEED…………..…………………………………………………………………… 3
TARGET COMPANIES………………………………………………………………………… 3
RELATED OCCUPATIONS…………………………………………………….……………… 4
SALARY RANGE………………………………………………………………………..…….4-5
POTENTIAL FOR PROMOTION………………………………………………………….…… 5
TRANSFERABLE SKILLS FROM HIGH SCHOOL……………………………………….….. 5
POTENTIAL INTERVIEW QUESTIONS…………...........…………........……………………. 6
ATTRACTION TO THIS CAREER……………............……………………………………….. 6
ACTION PLAN…………………………………………………….……………………………. 7
BIBLIOGRAPHY......……………………………………………………………………………. 8
JOB DESCRIPTION
Detectives, also known as investigators, are specially trained officers who investigate and solve crimes, like murders or robberies. While on a case, detectives will examine crime scenes, gather evidence and facts, collect physical evidence like weapons or perform background checks. From the crime scene, they can then narrow down a list of suspects and after they’ve made that list, detectives will continue to watch their main suspects’ activity, interview them or even analyse their credit card or...

...middle age, and then old age. Likewise, there are four stages in every industry’s life cycle and there are introduction stage, growth stage, maturity stage, and decline stage in industry life cycle. There is different with industry life cycle, the business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables. A business cycle is not a regular, predictable, or repeating phenomenon like the swing of the pendulum of a clock. Its timing is random and to a large degrees, unpredictable. There are four phases of business cycle, such as prosperity phase, recession phase, depression phase, and recovery phase. Lastly, the company’s stocks and bonds investment timing is important for the investors.
2. Concept of an industrial life cycle
2.1 Introduction stage
At the beginning of an industry’s life cycle, the firm may be alone in the industry and it may be a small entrepreneurial company or a proven company which used research and development funds and expertise to develop something new. Perhaps a new unique product offering has been developed and patented. There are many types of firms with different efficiency levels and historical backgrounds. They want to experiment with new product varieties because there are lots of opportunities for technological innovation and there’s little or no product standardization. For automobile industry, there were so many firms...